1.) Case-No.-1
1.) Case-No.-1
1.) Case-No.-1
193821, 2015-11-23
Facts:
On various dates between March 5, 1990, and August 29, 1990, petitioner Phil-Air sold to respondent
RCJ Lines four Carrier Paris 240 air-conditioning units for buses (units).
RCJ Lines paid P400,000.00, leaving a balance of P840,000.00.[6]
RCJ Lines accepted the delivery of the units, which Phil-Air then installed after they were inspected
by RCJ Lines president Rolando Abadilla, Sr.[7]
Phil-Air allegedly performed regular maintenance checks on the units pursuant to the one-year
warranty on parts and labor. After some months from installation, Phil-Air supposedly boosted the
capacity of the units by upgrading them to the Carrier Paris 280 model.[8] It also purportedly
repaired the control switch panel of one of the units for an additional cost of P60,000.00.[9]
RCJ Lines issued three post-dated checks in favor of Phil-Air to partly cover the unpaid balance:
All the post-dated checks were dishonored when Phil-Air subsequently presented them for payment.
Phil-Air sent a demand letter[11] to Rolando Abadilla, Sr. on April 7, 1992, asking him to fund the
post-dated checks.
On July 17, 1996, Phil-Air demanded payment from Rolando Abadilla, Jr., for the total amount of
P734,994.00... plus interest
In view of the failure of RCJ Lines to pay the balance despite demand, Phil-Air filed on April 1, 1998
the complaint[13] for sum of money with prayer for the issuance of a writ of preliminary attachment.
In its answer with compulsory counterclaim,[15] RCJ Lines admitted that it purchased the units in
the total amount of PI,240,000.00 and that it had only paid P400,000.00. It refused to pay the balance
because Phil-Air allegedly breached its... warranty.[16]
RCJ Lines averred that the units did not sufficiently cool the buses despite repeated repairs.
As it turned out, the Carrier Paris 240 model was not suited to the 45 to 49-seater buses operated by
RCJ Lines. The units, according to RCJ Lines, were defective and did not attain full operational
condition.
The RTC granted the application for the issuance of a writ of preliminary attachment after Phil-Air
posted an attachment bond in the amount of P1,656,000.00.[20] Two buses of RCJ Lines were
attached pursuant to the writ dated December 18, 1998.[21] The writ was executed on April 21,
1999.[22] The attachment, however, was later lifted when the RTC granted RCJ Lines' urgent motion
to discharge the writ of attachment.[23] RCJ Lines posted a counter-bond in the same... amount as
the attachment bond.[24]
Ruling on the merits after trial, the RTC found that Phil-Air was guilty of laches and estopped from
pursuing its claim. It also sustained the allegation that Phil-Air had breached its warranty.
The CA affirmed the RTC decision in toto.
Issues:
Whether Phil-Air should reimburse RCJ Lines for the counter- bond premium and its alleged
unrealized profits;
Whether RCJ Lines proved its alleged unrealized profits arising from the enforcement of the
preliminary writ of attachment; and
Ruling:
Phil-Air is not directly liable... for the counter-bond premium and
RCJ Lines' alleged unrealized profits.
Granting that RCJ Lines suffered losses, the judgment award should have been first executed on the
attachment bond. Only if the attachment bond... is insufficient to cover the judgment award can Phil-
Air be held liable.[49]
Section 4 of Rule 57 of the Rules of Civil Procedure (Rules) provides that "the party applying for the
order must...give a bond executed to the adverse party in the amount fixed by the court, in its order
granting the issuance of the writ, conditioned that the latter... will pay all the costs that may be
adjudged to the adverse party and all damages that he may sustain by reason of the attachment, if the
court shall finally adjudge that the applicant was not entitled thereto."
The enforcement of the writ notwithstanding, the party whose property is attached is afforded relief
to have the attachment lifted.
There are various modes of discharging an attachment under Rule 57, viz.: (1) by depositing cash or
posting a counter-bond under Section 12;[52] (2) by proving that the attachment bond was
improperly or irregularly issued or enforced, or that the... bond is insufficient under Section 13;[53]
(3) by showing that the attachment is excessive under Section 13; and (4) by claiming that the
property is exempt from execution under Section 2.[54]
RCJ Lines availed of the first mode by posting a counter-bond.
Under the first mode, the court will order the discharge of the attachment after (1) the movant makes
a cash deposit or posts a counter-bond and (2) the court hears the motion to discharge the attachment
with due notice to the adverse party.[55]
The amount of the cash deposit or counter-bond must be equal to that fixed by the court in the order
of attachment, exclusive of costs. The cash deposit or counter-bond shall secure the payment of any
judgment that the attaching party may recover in the action.
The filing of a counter-bond to discharge the attachment applies when there has already been a
seizure of property by the sheriff and all that is entailed is the presentation of a motion to the proper
court, seeking approval of a cash or surety bond in an amount equivalent to... the value of the
property seized and the lifting of the attachment on the basis thereof. The counter-bond stands in
place of the property so released.[57]
To be clear, the discharge of the attachment by depositing cash or posting a counter-bond under
Section 12 should not be confused with the discharge sanctioned under Section 13. Section 13 speaks
of discharge on the ground that the writ was improperly or irregularly issued or... enforced, or that
the attachment bond is insufficient, or that the attachment is excessive.
To reiterate, the discharge under Section 12 takes effect upon posting of a counter-bond or depositing
cash, and after hearing to determine the sufficiency of the cash deposit or counter-bond. On the other
hand, the discharge under Section 13 takes effect only upon showing that... the plaintiffs attachment
bond was improperly or irregularly issued, or that the bond is insufficient. The discharge of the
attachment under Section 13 must be made only after hearing.[58]
These differences notwithstanding, the discharge of the preliminary attachment either through
Section 12 or Section 13 has no effect on and does not discharge the attachment bond. The
dissolution of the preliminary attachment does not result in the dissolution of the... attachment bond.
The dissolution of the preliminary attachment upon security given [Section 12], or a showing of its
irregular or improper issuance [Section 13], does not of course operate to discharge the sureties on
plaintiffs own attachment bond. The reason is... simple. That bond is executed to the adverse
party,. . . conditioned that the ... (applicant) will pay all the costs which may be adjudged to the
adverse party and all damages which he may sustain by reason of the attachment, if the court shall
finally adjudge that the applicant... was not entitled thereto." Hence, until that determination is made,
as to the applicant's entitlement to the attachment, his bond must stand and cannot be withdrawn.
In the present case, the RTC lifted the preliminary attachment after it heard RCJ Lines' urgent motion
to discharge attachment and the latter posted a counter-bond. The RTC found that there was no fraud
and Phil-Air had no sufficient cause of action for the issuance of the writ... of the attachment. As a
consequence, it ordered Phil-Air to refund the premium payment for the counter-bond and the losses
suffered by RCJ Lines resulting from the enforcement of the writ. The CA affirmed the RTC ruling
in toto.
We reverse the CA and RTC rulings.
As discussed above, it is patent that under the Rules, the attachment bond answers for all damages
incurred by the party against whom the attachment was issued.[60]
Thus, Phil-Air cannot be held directly liable for the costs adjudged to and the damages sustained by
RCJ Lines because of the attachment. Section 4 of Rule 57 positively lays down the rule that the
attachment bond will pay "all the costs which may be adjudged to the... adverse party and all
damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the
applicant was not entitled thereto."
The RTC, instead of declaring Phil-Air liable for the alleged unrealized profits and counter-bond
premium, should have ordered the execution of the judgment award on the attachment bond. To
impose direct liability to Phil-Air would defeat the purpose of the attachment bond,... which was not
dissolved despite the lifting of the writ of preliminary attachment.
The order to refund the counter-bond premium is likewise erroneous. The premium payment may be
deemed a cost incurred by RCJ Lines to lift the attachment. Such cost may be charged against the
attachment bond.